Central Bank of Venezuela doubles down in “cyber-terrorism” website lawsuit

DolarToday wins motion to dismiss, but Caracas fires back with a new filing.

On Friday, lawyers for the Central Bank of Venezuela (CBV) filed a new amended civil complaint against DolarToday, the US-based website that publishes a daily unofficial exchange rate between American dollars and Venezuelan bolivares.

The Venezuelan government has made it a crime to publish the street trading rate as it countermands the "official" exchange rates, which are far more favorable to the government. The recent collapse of the price of oil has exacerbated Venezuela's economic woes; the country is widely expected to default on its international debts later this year.

Late last month, US District Judge Gregory Sleet ruled in favor of DolarToday’s earlier motion to dismiss. In his two-page ruling, Judge Sleet found that the CBV lacked standing and dismissed the case. However, he allowed the CBV to file an amended complaint within seven days, which it has now done.

As Judge Sleet wrote:

Price inflation in a nation's economy is not an injury sufficiently particularized to the Central Bank. Rather, inflation is a generalized harm. Additionally, an alleged injury must. be "concrete" both qualitatively and temporally. Whitmore v. Arkansas, 495 U.S. 149, 155; 158, (1990). Here, inflation is not sufficiently identifiable, but a hypothetical injury. Having found that there is no injury is fact, the court need not reach the remaining standing requirements. In conclusion, Central Bank lacks Article III standing and the court lacks subject matter jurisdiction as a matter of law.

Further Reading

In the new filing, the CBV's lawyers largely re-iterate nearly all of its previous arguments. CBV's legal team now adds specific injuries, which include:

Diminished seigniorage;

Reputational harm because Defendants’ reporting of manufactured exchange rates have created the false impression in the public that the Central Bank’s monetary policies are ineffectual and that it cannot manage the Venezuelan economy; and

Deprived the Central Bank of capital that it would attract and retain, by having caused numerous entities and persons to invest their capital elsewhere than Venezuela.

Ars asked Adam Fox, one of the CBV's attorneys, whether the CBV is claiming that the Venezuelan economy would be stable and well-functioning if not for the DolarToday website.

"The point of this lawsuit is that the DolarToday Defendants are publishing a fabricated exchange rate that is causing the Central Bank economic and reputational harm," he e-mailed. "The implicit suggestion of your questions that Venezuela also faces economic challenges that may be independent of those imposed by the DolarToday defendants is beside the point."

In a statement, Ben Wolkov, general counsel for DolarToday, described the lawsuit as "baseless" in a Thursday statement.

"As a US-based media outlet with rights to freedom of speech and freedom of the press, DolarToday will continue to focus on its dual mission of informing Venezuelans about the country’s social, political, and economic affairs and serving as a credible and authoritative source for other media outlets attempting to report on Venezuela," he said.

Printing more money is bound to solve the problem, right?

In the initial October 2015 civil complaint, the US-based lawyer for the CBV argued that the three Venezuelan-American men who run the site are engaged in "cyber-terrorism" designed to create "the false impression that the Central Bank and the Republic are incapable of managing Venezuela’s economy."

It is no exaggeration to say that the Venezuelan economy has been in something of a tailspin in recent years. Its authoritarian president, Nicolas Maduro (successor of strongman Hugo Chavez), has been unable to rein in skyrocketing inflation (now at 180 percent) and a massively depressed economy. The country recently sent $1.28 billion worth of gold to Switzerland as a way to avoid a default. On Thursday, the president of the CBV told the Associated Press that the country would be printing larger bills to accommodate skyrocketing inflation.

DolarToday, as it explains in its motion to dismiss, does nothing more than call currency traders on the Venezuelan-Colombian border to find out what the exchange rate is between bolivares and pesos. The site simply converts the pesos to dollars to find out the market rate between bolivares and dollars. The site then publishes that figure.

Venezuela has maintained strict currency controls since 2003 and its currency cannot—at least officially—be traded on the open market. The government maintains multiple "official" exchange rates, which differ depending on what purpose the foreign currency is needed for. The black market exchange rate, at least according to DolarToday, is significantly higher. As of this writing, $1 buys about 975 bolivares. For years, the Venezuelan government has blocked domestic access to the US-based site.

"While the Venezuelan government has made it illegal for anyone to publish black market currency rates in Venezuela and has blocked DolarToday’s website from the Internet in that country, Venezuelans access the DolarToday rate on DolarToday’s Facebook, Twitter, and Instagram pages," Ricardo A. Gonzalez, another attorney who represents the website, said in the same Thursday statement.

Promoted Comments

DolarToday is indeed used as the reference point for dollars, since the "official" exchange rate is not accesible to anyone except for those close to the government. If you want to import something you have to pay it at black market prices. Now, everyone knows that 1035 bsf/$ is NOT the real value either (it is close to 300 bsf/$ in reality), but since nobody sells you dollars at that price, supply and demand law kicks in and the price is greatly inflated.

Now, who's at fault? the market, the speculators, the people that buys at that price out of need?

Or maybe the government that maintains a ridiculous exchange control that is useless, inflationary and a giant focus of corruption? Let's add into the mix an Economy MInister (that was a Sociologist with no economy studies) that said that the inflation "didn't exist" and that it was induced.

So, this trial is nothing more than the gov showing their supporters that they "are fighting against the empire's economic war!!!!", because supposedly it's not the gov fault that the inflation is estimated at 700% for this year, no, it's obviously the fault of the private industry, the colombians, the CIA, Obama, etc etc.

Venezuelan here. I will briefly explain our country's situation.Oil prices skyrocketed upwards 100$ a barrel and the government didn't take advantage of this situation to improve the country. Venezuela makes money (USD) only by selling oil and nothing else. When the oil prices came down, of course income came down and there's no money for anything.

The government has had a fixed exchange rate since 2003. You can't go to a bank and freely buy some USD. You have to fill lots of forms and pray to God that it's approved and that your credit card works when you travel. There used to be over 3 different exchange rates depending on the use, which of course raised corruption. People bought USD at the cheap exchange rate of 6.30 bolivares per USD and just resold them on the black market for a huge profit.

The inflation is not 180%, that's the "official" published inflation, while the real inflation is over 700%. Gas prices were just raised over 6000%, and it still is the cheapest one on the planet.

Salaries are a joke, i earn less than 1$ usd per day (at the current black market rate of 1100 bolivares).Almost every basic good (that isn't regulated by the government) is priced according to this black market rate, since companies cannot get access to "cheap" dollars. Nothing gets produced here, everything is imported.

Basic goods that are regulated are so cheap that people stand in line and resell them for hundreds of percent of profit. Adding to that, there is a extreme drought and our dams are almost empty, and 80% of the electricity is generated by a single dam, means that a total collapse is expected in just one month if it doesn't rain, and diarrhea and skin diseases are starting to happen due to lack of water and soap. Every time i go to the market i have to stand in line for over 4 hours, and 90% of my salary goes out just to eat.

Since the government doesn't know what to do, they decided to sue the website in order to silence it. Everyone here uses that website and i do believe it influences the economy, however if they kill it a new one will be created in just days